You're Probably Asking the Wrong Questions

LOS ANGELES—The question has been asked and asked: where are we in this cycle? While some ask the question as a cautionary measure, a reminder of the Great Recession, and others are looking to gauge the remaining investment runway, we have all asked it—except for Camille Renshaw, director and lead broker at Stan Johnson Co. Renshaw is speaking on the investment and transaction outlook panel at the RealShare Net Lease West conference on November 12 in Downtown Los Angeles, where the question will inevitably be posed to the panel, which includes moderator Sean O'Shea, managing director at O'Shea Net Lease Advisory;  Zachary Pasanen, VP at W.P. Carey; and Mike Paeske, EVP and principal at Net Lease Management, a division of CFI Commercial Facilities.

“I think it might be the wrong question, and I know we keep asking it, but I think there are other metrics that we need to look at,” Renshaw tells GlobeSt.com. “Financing has changed substantially since the last downturn, and I don't know if a bubble bust is going to happen in the same way.” She said that she didn't know the right question to ask, but she thought that job growth and market share were more important to the conversation than supply and demand alone. “I think when you are talking about particular real estate assets there is a balancing act between the quality and usability of the real estate over a very long period of time; the quality and the sustainability of the tenant credit; and the capital stack going into that asset and how bullish the investors are in terms of the kind of debt and equity they will use. Those three things are pretty important,” she adds. “We have looked a lot to supply and demand more than how assets are living on someone's portfolio. I think that supply and demand is very important, but I think that it is so constrained that we could get caught asking the wrong questions instead of looking at the metrics that create real value.”

The net lease market is incredibly active and incredibly supply constrained, but she says that isn't an indication that we are heading for a plateau. Her advice: reorganize your portfolio to find where there is room for growth and where you can add value in the long term. “A lot of sellers are saying that there is a lot they can sell but not a lot to buy, and I am not sure that is true. You need to look at your portfolio and reassemble it, just like you would a stock portfolio,” she says. “You need to really think about how to hedge your bets in different sectors and geographies. This is the moment in time to really do that. Even if it feels like a loss on paper, this is the moment to really own all of the assets that you want to own because the values are going to increase over the long term.”

Eschewing the proverbial CRE idioms, Renshaw said that we are not in a “seller's market” we are in a “liquid market.” “It is really easy to trade in and out of assets right now because the market will fluctuate,” she says, pointing out that you don't have to trade a 7-Eleven for another 7-Eleven. “This is the time to look at your portfolio and decide the assets you really want.”

Hear more about her market perspective and advice at RealShare Net Lease West on November 12 in Downtown Los Angeles.